Tired of Buying Other Companies, PE Firms Now Look To Acquire Each Other

While no deal has officially been announced, rumor has it Ares Management LP is in the process of acquiring Kayne Anderson Capital Partners in an effort to create a publicly traded private equity giant managing well over $100B in assets.

Ares is a global alternative asset manager focused on credit and private equity strategies that went public 13 months ago. With approximately $87B in assets under management, the firm’s stock price is up 18% on the year as it continues to assess possible acquisitions.

Earlier this month, Mike Arougheti, president of Ares, said one reason the firm went public was to create currency to pursue strategic acquisitions. Arougheti also pointed out that founders of private equity firms that started in the 1980s and 1990s are aging and thinking about how their companies can continue.

Firms like Kayne Anderson are potentially ripe for consolidation, and Ares has positioned itself to move on these opportunities. Ares is also interested in acquiring part of
General Electric Co.’s private equity lending unit. GE previously announced that it was divesting much of its
GE Capital business.

A deal like this would be rare but not completely unheard of. In early 2008 Blackstone Group LP acquired GSO Capital Partners LP for a reported $930M. The deal, at the time, added $10B in leveraged loans and distressed debt investments to Blackstone’s $35.8B in hedge-fund assets.

A New Wave of Consolidation?

I’ve watched the wave of consolidation crash across a number of industries; from trucking and logistics to IT services. Could this deal be the catalyst for consolidation in the PE space? Possibly. GE’s divestiture will also change the landscape, as it is exiting a business where it has historically been a strong player.